Will we see an interest rate move this year?
Today we have minutes from the Bank of England’s last monetary policy committee (MPC) meeting and the same from the Federal Open market Committee in the US. The markets will be analysing the texts for clues on interest rate directions in the respective countries. Despite GBP’s apparent strength against EUR, it is actually being heavily sold before the BoE minutes i.e. if the minutes show any signs that the committee are leaning towards an interest rate rise sooner rather than later, then we will see a positive bounce in GBP. However given yesterday’s inflation data reading, this could be considered unlikely.
Yesterday, GBP/EUR started at 1.3750, by 9.15am it was at 1.3945, by 10am it was back to 1.3830 and GBPUSD moved from circa 1.5690 to sub 1.5500 over a the course of the day. In short, there was a crazy slalom of economic data which started with the ECB’s comments around accelerated QE (weakening the Euro), which was then followed by poor inflation data from the UK, showing a headline reading of -0.1%. Later we saw some really positive data from the US in the form of Housing data.
The ECB’s comments on Tuesday, relating to an acceleration or frontloading of QE, have kept the selling pressure on the Euro. This morning’s downbeat German Producer Price Index has given EUR a further kick today. Of course, this is all in the context of the continuing Greek crisis which, despite not having any headline making deadlines this week, is still showing a distinct lack of progress.
Elsewhere, Japan posted some overnight data showing Q1 GDP was at 2.4% versus the expected 1.5%. The data is all the more significant because it represents the first consecutive reading of positive quarterly GDP data for some time. GBPJPY has therefore seen the first significant strengthening in JPY in a while.
The political uncertainty in Poland persists with GBPPLN swinging from sub 5.45 to plus 5.70 and back again in a matter of days.